Will the EU Disclosure Regulation apply in the UK?
As things stand, no. The Disclosure Regulation (the Regulation) applies from 10 March 2021, meaning it does not become operative until after the end of the Brexit transition period on 31 December 2020.
Under current UK law, only EU law that is operative at 11pm on 31 December 2020 will be automatically onshored into UK domestic law. As a result, the Regulation will not be onshored into UK law and will not apply in the UK.
Will the UK introduce its own version of the Regulation?
Given the UK Government’s stated desire to “lead from the front” on ESG, we do expect the UK to introduce a similar regime to the Regulation in the not-too-distant future. Any UK-specific regime would likely require new legislation to be passed in Parliament and the usual FCA consultation process before being implemented.
What does this mean for UK firms now?
The Regulation will nevertheless apply directly to UK firms in certain circumstances:
- marketing to EU investors/clients: the Regulation will apply to UK firms who market their funds or other financial products in the EU; and
- managing EU funds or products: the Regulation will also apply to UK firms who continue to provide alternative investment fund manager services to EU-based funds.
The Regulation will not apply to UK firms with wholly UK operations (i.e. those who do not have any EU-based funds or products, and who do not market to EU-based investors). However, some firms in this camp may nevertheless decide to “opt in” and voluntarily adopt the obligations imposed by the Regulation, perhaps for reputational reasons or to meet (or exceed) investor or client ESG expectations.